Deposits with the Federal Reserve Bank are part of a commercial bank’s
A) capital.
B) reserves.
C) loans.
D) liabilities.
The behavior of many savings-and-loans in the 1980s appears to be evidence
__________ the existence of __________ problem in deposit insurance.
A) supporting; a moral hazard
B) supporting; an adverse selection
C) against; a moral hazard
D) against; an adverse selection
In the Keynesian model, when desired saving exceeds desired investment,
A) inventories rise.
B) inventories fall.
C) the price level rises.
D) the price level falls.
A vertical aggregate supply curve implies __________ Phillips curve.
A) an upward-sloping
B) a downward-sloping
C) a vertical
D) a horizontal
Which of these qualifies as a “miscellaneous liability” of a bank?
A) repurchase agreements
B) negotiable CDs
C) transactions deposits
D) savings deposits
The financial systems of __________ have major firms working all their external
financing through a single bank.
A) Japan and the United Kingdom
B) the United States and the United Kingdom
C) Germany and the United Kingdom
D) Japan and Germany
Assume the deposit expansion multiplier is 3.0. If the Treasury borrows $5 billion from
the Non-bank public and spends it on the public, bank reserves will
A) rise by $5 billion.
B) fall by $5 billion.
C) rise by $15 billion.
D) not change.
A 91-day $10,000 Treasury bill is selling for $9,000. The bill’s yield on a discount basis
is __________ percent.
A) 3.36
B) 3.96
C) 7.91
D) 10.0
Liens __________ the moral hazard problem since the borrower is then __________ to
sell the affected assets at its discretion.
A) worsen; able
B) worsen; unable
C) ease; able
D) ease; unable
The theory of “rational expectations” is most closely associated with __________
economists.
A) Classical
B) Keynesian
C) Monetarist
D) New Classical
Along an IS curve as interest rates __________, income must be __________ so that
saving, which is a positive function of income, can be higher to equal the higher level
of investment.
A) decline; lower
B) decline; higher
C) increase; lower
D) increase; higher
Using the simple Keynesian model with a consumption function of C = 200 + .9Y, an
$10 change in desired investment leads to a change in equilibrium income of
A) $10.
B) $100.
C) $20.
D) $90.
The proposed Basel II capital adequacy rules
A) address the incentive banks have to switch from riskier to safer assets.
B) avoid the use of statistical rules by relying mostly on “common sense.”
C) use highly theoretical measures of risk.
D) will likely be adopted initially to a handful of large banks with significant
international exposure.
“Crowding out” occurs as an expansionary fiscal policy __________ interest rates, thus
__________ investment spending.
A) raises; increasing
B) raises; decreasing
C) lowers; increasing
D) lowers; decreasing
Considerable day-to-day volatility in major exchange rates is caused by
A) shifts in tastes or preferences for domestic versus foreign goods.
B) international capital mobility and expectations of future exchange rates.
C) sudden changes in productivity in one nation versus others.
D) highly variable inflation rates in some industrialized countries.